Water Markets: Australia's Murray-Darling Basin and the US Southwest

R. Quentin Grafton, Clay Landry, Gary Libecap and Robert J. O'Brien

No 15797, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Fresh water supplies increasingly are under stress in many parts of the world due to rising populations, higher per capita incomes and corresponding consumption, greater environmental concerns, and the effects of climate change. Water rights and markets are part of the institutional menus for responding to these problems. We examine water markets in both Australia's MDB and the western US and their prospects for addressing water scarcity. The two regions share a number of important similarities including: climate variability that requires investment in reservoirs to make water available in low-rainfall periods; the need for internal and cross-border (state) water management; an historical major allocation of water to irrigators; increasing competition among different uses (agricultural, environmental and recreational in situ uses, urban demand); and the potential for water trading to more smoothly and quickly allocate water across these competing uses. A comparison of the two regions provides important insights about how economic factors can encourage more efficient water allocation, market structure and government regulation. We show that rights are more clearly defined and trading more common in Australia than appears to be the case in the western U.S. Longer periods of scarcity and hence, higher water values may explain this difference.

JEL-codes: K11 N5 Q25 Q54 Q58 (search for similar items in EconPapers)
Date: 2010-03
Note: DAE EEE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published as A Comparative Assessment of Water Markets: Insights from the Murray-Darling Basin of Australia and the Western US” by R. Quentin Grafton, Gary D. Libecap ,Eric C. Edwards, R.J. (Bob) O’Brien, Clay Landry, Water Policy 2012.

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Working Paper: Water Markets: Australia's Murray Darling Basin and the US Southwest (2009)
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